2006 (7) TMI 605 - HC - VAT and Sales Tax

Summary

Issues:
1. Cancellation of sales tax exemption for bottled drinking water manufacturers.
2. Validity of the retrospective cancellation of the exemption.
3. Application of promissory estoppel doctrine.
4. Interpretation of statutory provisions under the Kerala General Sales Tax Act, 1963.

Analysis:
The appellants, who are manufacturers of bottled drinking water, challenged the cancellation of the sales tax exemption granted to them through exhibit P10. The exemption was initially granted by the Government through a notification issued in 2004. However, a subsequent notification, exhibit P8, was issued in 2005 canceling the exemption retrospectively, imposing tax liability on the appellants for the period from January 1, 1994, to April 9, 2002. The appellants contended that the cancellation was invalid on the grounds that the statutory provisions did not empower retrospective cancellation and that the Government was estopped from revoking the exemption based on the doctrine of promissory estoppel.

The learned single Judge upheld the cancellation of the exemption, stating that exhibit P10 was granted based on incorrect data and misplaced sympathy. However, the High Court found that the power conferred on the Government under section 10(3) of the Act did not allow for retrospective cancellation of exemptions granted under section 10(1). The Court noted that while the Government had the authority to grant exemptions retrospectively, the power to cancel such exemptions retrospectively was not explicitly provided for in the legislation. Therefore, the retrospective cancellation through exhibit P8 was deemed ultra vires the statutory powers conferred under the Act.

In light of this finding, the Court reversed the impugned judgment and quashed exhibit P8. The Court also rejected the Government Pleader's argument that exhibit P8 merely withdrew the benefit conferred in exhibit P10, emphasizing that the method adopted in exhibit P8 was a cancellation, not a variation. Consequently, the Court allowed the writ appeals filed by the appellants, holding that the retrospective cancellation of the exemption was not valid under the statutory framework.